Valuing a board with value investor guy spier.

• Position: 5 OUESTIONS WITH ... - Dialogue with Aquamarine Capitals ceo Guy Spiers - Interview

Ed. Note: A million dollars invested in Guy Spiers Aquamarine Fund when he founded it in 1997 would have been worth $5.63 million when his new book, The Education of a Value Investor [Palgrave Macmillan], came to market in September 2014. (The comparable return of a like investment in the S&P 500 Index would have been S2.7 million.) Starting out as a self-professed "Gordon Gekko-wannabe," Spier traces in his book his transformation to a more enlightened state, one in which "investing is about much more than money." One stop along this transformation was a "life changing" lunch with Warren Buffett, snared by a winning philanthropic bid of $650,100. While the Zurich-based Spier shares some profound insights and powerful tools" for market-beating returns that he says can make the reader rich--"perhaps wildly rich"--his story is not an investment how-to. "It's the story of my journey and what I've learned along the way," he notes. Directors & Boards wanted to know what he learned about boards, so we fielded him a few questions that follow. See accompanying box for an excerpt from his book.

Does the board of directors factor into your decision making on an investment?

Quality of the board is a substantial factor in assessing the quality of the management. Warren Buffett taught me that if you hang around people who are better than you, you cannot help but improve. People who understand this idea will look to get around great people. I am looking for businesses that ref lectthis ethos in their board of directors. Berkshire Hathaway is a great example of that

Of course, it's a two-way street. Great businesses tend to attract great directors; great people tend to be in demand to be directors of great businesses

What do you like to see when you look at the board in researching a potential investment?

Most important is to see that the board has structured management compensation in a way that is rational and makes sense for everybody. That should be explained in a clearly written and concise compensation report that does more than simply rubber-stamp the decision of a hired compensation consultant. It saddens me when I see a compensation committee that appears to be captive to the management and the compensation consultant.

I also like to see board members who have acquired a substantial stock ownership in the business themselves--via cash purchases, not stock options. And I don't mind and even like to see family members and people related in some way...